Chapter 18 - Audit
Select all that apply The auditor's standard unqualified audit report for a public company contains the ______. "Critical Audit Matters" section how long the auditor has served name and signature of firm breakdown of fees billed to the client "Opinion" section
"opinion" section "critical audit matters" section name and signature of firm how long the auditor has served
Select all that apply Circumstances that likely will result in an audit opinion that departs from an unqualified opinion include ______. a departure from GAAP lack of auditor independence important events that occurred after the balance sheet date. significant related-party transactions that are appropriately disclosed a scope limitation
a scope limitation a departure from GAAP lack of auditor independence
Select all that apply An auditor issues a qualified opinion when there is ______. a specific departure from GAAP but overall the financial statements present fairly in conformity with GAAP a GAAP departure that materially affects the financial statements overall such that the statements are not fairly presented a scope limitation a lack of independence insufficient appropriate evidence
a specific departure from GAAP but overall the financial statements present fairly in conformity with GAAP a scope limitation
When the financial statements do not present fairly due to a GAAP departure that materially affects the financial statements overall the auditor will issue a(n) _____ opinion.
adverse
Materiality not a factor when considering ______. scope limitations work performed by other auditors departures from GAAP auditor independence
auditor independence
Unmodified or unqualified opinions both refer to a(n) ______ audit opinion.
clean
Any matters arising from the audit of financial statements that are communicated or required to be communicated, to the audit committee, that relate to material financial statement accounts or disclosures and involved especially challenging, subjective, or complex auditor judgment are called ______ ______ matters
critical audit
The PCAOB anticipates that the audit report's new emphasis on _____ or ______ audit matters will enhance auditor communication and thus improve the quality of financial reporting.
critical, key
Select all that apply In the CAM section of the audit report, a paragraph or table must ______. name the audit partner who assessed CAM describe how each CAM was addressed in the audit explain how each matter was determined to be a CAM refer to financial statement accounts and disclosures related to the CAM
describe how each CAM was addressed in the audit explain how each matter was determined to be a CAM refer to financial statement accounts and disclosures related to the CAM
If a scope limitation is so significant that the auditor considers the financial statements taken as a whole to be unreliable, the auditor will likely issue a(n) ______ opinion. adverse disclaimer of qualified
disclaimer of
When there is a lack of auditor independence the auditor ______. issues an unqualified opinion with explanation issues an adverse opinion issues a qualified opinion that identifies the specific areas where independence is lacking disclaims an opinion
disclaims an opinion
True or false: The auditor's opinions on the financial statements and on the effectiveness of internal control must be presented in two separate reports with the same dates.
false
Select all that apply In order to be identified as a CAM, a matter must _______. have involved especially challenging, subjective or complex auditor judgment be one that has or will be communicated to the chief executive officer relate to accounts or disclosures that are material to the financial statements
have involved especially challenging, subjective or complex auditor judgment relate to accounts or disclosures that are material to the financial statements
The PCAOB presumption is that in most audits the auditor will ______ CAM(s). identify multiple not identify any identify at least one
identify at least one
Select all that apply Pervasive effects on the financial statements are those that ______ of the financial statements. are confined to specific elements, accounts, or items include disclosures fundamental to users' understanding represent or could represent a substantial proportion
include disclosures fundamental to users' understanding represent or could represent a substantial proportion
An ASB audit report ______. indicates the audit was conducted in accordance with generally accepted auditing standards contains an opinion on the effectiveness of the entity's internal control over financial reporting is titled "Report of Independent Registered Public Accounting Firm"
indicates the audit was conducted in accordance with generally accepted auditing standards
An error was judged to be material by the auditor even though it did not rise to conventional levels of materiality in quantitative terms. This was likely because the error was ______. due to lack of auditor independence accidental due to carelessness intentional
intentional
A PCAOB report ______. recommends but does not mandate the disclosure of CAMs is titled "Report of Independent Registered Public Accounting Firm" indicates the audit was conducted in accordance with generally accepted auditing standards
is titled "Report of Independent Registered Public Accounting Firm"
Select all that apply When a scope limitation exists but overall the financial statements present fairly in conformity with GAAP the auditor will ______. issue a qualified opinion use the word "except for" in the report issue an unqualified opinion with explanation explain the impact of the faulty accounting issue an adverse opinion
issue a qualified opinion use the word "except for" in the report
An intentional management error can be considered _______ by the auditor regardless of the magnitude of the error.
material
A GAAP departure that is seen as ______ and ______ will generally result in an adverse opinion.
material, pervasive
A GAAP departure that is seen as ______ but not ______ will generally result in an qualified opinion.
material, pervasive
Under the new PCAOB reporting standards, the _______ section of the report is now presented first.
opinon
Auditing standards use the term _______ to describe the potential effects of a scope limitation or departure from GAAP on the auditor's report.
pervasive
A material, but not pervasive, scope limitation will normally result in a(n) ______. standard unqualified opinion standard unqualified opinion with an explanatory paragraph disclaimer of opinion qualified opinion
qualified opinion
When an auditor is not independent the auditor must disclaim an opinion ______. only if the condition that caused the lack of independence is material only if the factors impacting independence are pervasive regardless of the significance of the condition that caused the lack of independence
regardless of the significance of the condition that caused the lack of independence
Select all that apply: The auditor's standard unqualified audit report for a public company contains the ______. audit report date report title the addressee name of the engagement partner "Basis for Opinion" section
report title the addressee "basis for opinion" section audit report date
An inability to collect sufficient appropriate evidence is considered a(n): departure from GAAP lack of auditor independence lack of auditor competence scope limitation
scope limitation
The nature and magnitude of the potential effects of the financial statement area that the auditor was unable to examine and its significance to the overall financial statements should be considered in the assessment of a(n) _____ ____
scope limitation
Select all that apply The new PCAOB reporting standards include ______. separate disclosure of critical audit matters an implicit statement that the auditor is independent a clearer description of management and auditor responsibilities reporting the opinion section last
separate disclosure of critical audit matters a clearer description of management and auditor responsibilities
Select all that apply The PCAOB believes the new auditor's report will ______. enhance communication between management and investors sharpen auditors' sense of professional skepticism in dealing with audit matters improve the quality of financial reporting provide more information and insight to stakeholders
sharpen auditors' sense of professional skepticism in dealing with audit matters improve the quality of financial reporting provide more information and insight to stakeholders
When the audit has been performed in accordance with applicable auditing standards, the auditor has gathered sufficient evidence, and the auditor believes that the financial statements conform to GAAP a(n) _____ _____ financial statement audit report is issued.
standard qualified
When an entity has a departure from GAAP judged to be immaterial by the auditor, the auditor will most likely issue a(n) ______. disclaimer of opinion standard unqualified opinion opinion qualified for a scope limitation opinion qualified for a GAAP departure
standard unqualified opinion
Select all that apply An auditor issues a standard unqualified audit report when ______. the auditor believes the financial statements conform to GAAP in all material respects the auditor has received payment for services rendered in order to issue the audit report sufficient evidence has been gathered by the auditor the audit has been performed in accordance with applicable auditing standards
the audit has been performed in accordance with applicable auditing standards sufficient evidence has been gathered by the auditor the auditor believes the financial statements conform to GAAP in all material respects
Select all that apply In identifying CAMS, auditors must take into account ______. management's assessment of significant risks of material misstatement the nature and timing of significant unusual transaction transactions degree of auditor judgment related to areas that involved significant management judgment
the nature and timing of significant unusual transaction transactions degree of auditor judgment related to areas that involved significant management judgment
Select all that apply: When the two opinions over internal control and over the financial statements are presented separately, ______. the reports must have the same date each engagement must use the same audit staff and refer to this consistency within the report each report must include an explanatory paragraph referring to the opinion expressed in the other report each report must contain the same type of opinion either unqualified, qualified, or adverse
the reports must have the same date each report must include an explanatory paragraph referring to the opinion expressed in the other report
Select all that apply An auditor may use a disclaimer of opinion when ______. there is a lack of independence there is a specific departure from GAAP but overall the financial statements present fairly in conformity with GAAP there is insufficient appropriate evidence to form an opinion the financial statements do not present fairly due to a GAAP departure that materially affects the financial statements overall
there is a lack of independence there is insufficient appropriate evidence to form an opinion
True or false: Auditors explicitly consider auditor subjectivity when determining what matters should be considered CAMs.
true
Select all that apply A "clean" opinion is also called a(n) ______ opinion. unqualified qualified unmodified modified
unqualified unmodified
An immaterial scope limitation will normally result in a(n) ______. standard unqualified opinion with an explanatory paragraph unqualified opinion qualified opinion disclaimer of opinion
unqualified opinion
